FDI in Indian retail sector-promises, issues and challenges

Retailing in India is one of the pillars of its economy and accounts for 14 to 15 per cent of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. As per the recent revelations by the popular International Management Consultancy AT Kearney, India has been considered the second most lucrative destinations of the world for retail business. India is one of the fastest growing retail market in the world, with 1.2 billion people. Indian retail industry is one of the sunrise sectors with huge growth potential. The Indian retail sector comprises of organized and unorganized retail sectors. Foreign direct investment has boomed in post-reform India. Moreover, the composition and type of foreign direct investment has changed considerably since India has opened up to world markets. This has fuelled high expectations that foreign direct investment may serve as a channel to the higher economic growth of India. As part of the economic liberalization process set in place by the Industrial Policy of 1991; the Indian government has opened the retail sector to FDI slowly through a series of steps. After months of policy paralysis, Manmohan Singh‘s government roared back to life on Friday, 14^th of September by unleashing a blitz of reforms. It also made drastic progress in allowing multi-brand retailing, which had so far had been prohibited in India. India has liberalized its retail industry to permit foreign investment, with regulatory issues and legal structures pertinent to establish operations in this new dynamic market. In this context, the present paper attempts to review the promises (positive impacts and negative impacts), issues and challenges of FDI in Indian retail sector.